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> Posted by Ignacio Mas, Independent Consultant
Remote payments usually are the beachhead for mobile money as it struggles to create a role for itself alongside cash in developing countries. It’s easier to create customer awareness, induce customer experimentation, and generate customer willingness to pay when you are addressing situations in which cash presents the biggest pain points – sending money home, paying bills at distant and busy utility offices, travelling with or delivering larger stashes of money.
But that’s a limited market. Those are not daily occurrences for most people. And in many markets, especially outside of Africa, the reality is that people already have decent domestic remittance or bill payment mechanisms – through networks of pawnshops in the Philippines, courier companies in Colombia, or Hawala in Afghanistan.
Now mobile money providers are itching to get into the merchant (i.e. in-store) payment space. That’s where you can drive daily as opposed to monthly usage, so that’s where the volume is.
Of payment volumes and value
Much of the discussion on mobile retail payments centers on pricing models (merchant fees, interchange, potential cannibalization of P2P pricing), usability issues (customer convenience, speeding up transactions at the store), and acquiring strategy (how to roll out devices at stores and at what cost). These issues arise because cash is a much stronger competitor here than in a remote setting: paying some cents and waiting some seconds for an SMS confirmation are an irrelevance when you are sending money halfway across the country, but can tax people’s sense of fairness and patience in a retail setting. The less value people and stores see in electronic payments the larger these issues will loom.
But treat these as hygiene factors. Imagine that you could buy half a kilo of rice at any corner store from your mobile wallet at no cost and as conveniently as you flash out a banknote. Still, the fundamental question remains: why would you take out of your pocket your mobile phone rather a banknote?
> Posted by Danielle Piskadlo and Jeffrey Riecke, Senior Program Specialist and Communications Assistant, CFI
The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.
Thanks to social media, we are in a new era of sharing. Everything from major life events to fleeting thoughts like “I’m hungry” get posted, tweeted, and shared within social circles these days. And the provision of financial service – once a private affair – is not immune.
Sites such as Prosper and Kickstarter are among the many new crowdsourcing websites that allow people to share – in fact, advertise – their status of “I need a loan.” And these sites are revolutionizing what it means to be an entrepreneur or artist today by smashing the barriers to entry for funding a new idea, skill, or product.
In a big way, the days of trying to explain the market potential of your business plan for a trendy new app to a banker are disappearing as are the days of playing your music in the subway or selling your art on the sidewalk, hoping to get discovered. Now, almost anyone with a product or craft can simply post it on one of many sites to crowdsource the funding.
One of the beauties of crowdsourced financing is that it allows an entrepreneur or artist to assess market demand. The crowd tells you if your idea or art has potential by funding it. And distributed funding requests allow entrepreneurs or artist to tap into social networks for support in a meaningful way and without any real risk.
There are many crowdsourced financing platforms out there, and lots of different business models, so let’s take a closer look at one of the more prominent outfits: Kickstarter. Since the service began in mid-2010, more than 4.9 million people have backed a Kickstarter project, pledging over $800 million across 49,000 projects.
> Posted by Jami Hubbard Solli, Senior Policy Advisor, Consumers International UK
Spanish Version » French Version »
What really happens to microfinance clients who do not repay their obligations?
As a late-comer to microfinance in 2005, I bustled from the Boulder training, to the Blue Book conferences, to the MicroCredit Summits (and back), trying to understand the dynamics of microcredit. At all these events, I heard proclamations of very high repayment rates, which sparked curiosity about what happened to that small percentage of borrowers who couldn’t (or wouldn’t) repay their microloans. This topic wasn’t presented at any conference I attended.
There has been industry research done on why clients default, as well as interesting work highlighting the gap between providers’ and borrowers’ perceptions and experiences related to over-indebtedness.¹ However, there is very little work done that details the actions taken by practitioners when a borrower doesn’t repay, nor on the experience for defaulting clients in the short-term, or over time.
The knowledge gaps on default management include what providers actually do, as well as what influence (if any) legal and regulatory frameworks have on industry practices. For example, what guidelines or boundaries does a country’s legal framework offer on debt collection? Is there a prescribed manner in which MFIs can collect a past due debt, including how to go about the seizure, valuation, and the sale of collaterals? Is there a limit to the length of time which a borrower is legally responsible for a debt? What are MFI practices regarding collection post write-off? Are there any insolvency or personal bankruptcy provisions available to debtors, either by law, or through voluntary debt counseling centers? More importantly, if the legal framework does exist, is it enforced? Are MFIs aware and in compliance with requirements? And, lastly, there does not appear to have been any industry research on the consequences of default from the client perspective.
The Smart Campaign is very interested in these topics, as are many practitioners we have been in touch with. Thus, this month, to kick-start a larger investigative project, CFI invited endorsers of the Smart Campaign to take part in a survey that asked MFIs about practices related to default. We believe that collection, analysis, and dialogue around such information can help the industry improve how it handles clients in arrears, and perhaps how to salvage, versus sever, relations with clients who have defaulted.
> Posted by Center Staff
When was the last time you visited the FI2020 Global Forum webpage? Whether you’re a frequent visitor or it’s been some time, we’re pleased to share a batch of freshly confirmed speakers and side meetings at the landmark financial inclusion event, October 28-30 in London. Here are the new speakers:
- Michel Losembe, CEO, Banque Internationale pour L’Afrique du Congo (BIAC); President of the Association of Congolese Banks
- Sian Williams, Head of Financial Inclusion, Toynbee Hall
- Faisel Rahman, Managing Director, FairFinance
- Kamal Quadir, CEO, bKash
- Mark Hookey, Founder, Demyst.Data
- Arjuna Costa, Investment Partner, Omidyar Network
- Michel Khalaf, President, EMEA MetLife, Inc.
- Elly Ohene-Adu, Head of Banking Department, Bank of Ghana
- Oscar Graham, General Director of the Financial Markets and Provisional Funds Division, Ministry of Finance and Economics, Peru
- Mariela Zaldivar, Manager of Products and Client Services, SBS Peru
- Richard Eldridge, Co-Founder and Asia CEO, Lenddo
- Jojo Malolos, Managing Director, Cignifi
In our last Global Forum update post we announced two special side meetings on financial inclusion for persons with disabilities (PWDs) that will be held before the Forum, the evening of October 27 and the morning of October 28. As we indicated, the two sessions will convene disability inclusion leaders to discuss the importance of closing the financial services accessibility gap for this largely unbanked group, and challenges and solutions for doing so.
> Posted by Center Staff
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
We’re excited to announce the launch of the Roadmap to Financial Inclusion, a major initiative of Financial Inclusion 2020.
Through an extensive consultative process, we developed a set of recommendations to move financial inclusion forward, using the year 2020 to galvanize thought and action. Each of five working groups, with participation from a diversity of countries and stakeholder groups from the public and private sectors, developed a “roadmap” that serves as a springboard for dialogue and action. Individual conversations with experts and practitioners informed the roadmaps, as well.
The resulting roadmap principles and recommendations are meant to help keep the financial inclusion community focused and accountable for guiding inclusion in a direction that will fulfill its promise to improve lives and boost economies. They demonstrate the need for a strong demand-side orientation, signaling that financial inclusion is not just about expanding access, but also about ensuring quality so that usage will be high and customers will benefit. Some recommendations are directed at financial service providers, while others focus on governments and regulators. Support organizations, ranging from technology companies to international funders, are also addressed.
Here are the core roadmap principles, as well as a sample recommendation from each roadmap.
Financial Capability: Shift the Paradigm
Currently, the paradigm for financial capability is focused on financial education as knowledge transfer. Instead, we must think of financial capability in light of its end goal: sound financial choices and behavior. People learn best by doing. To achieve this, stakeholders involved in financial inclusion have a responsibility to integrate financial capability building into every aspect of their work and products, both with current and prospective customers. The scale of the need means that many actors are welcome, including providers, governments, non-profits, schools, and others.
Sample recommendation: Providers can use electronic customer touch-points to support financial capability at low cost, for example, SMS reminders that alert clients before a loan is due or encourage regular savings.
> Posted by Center Staff
A new private equity fund to back financial services providers targeting low-income clients in Africa, and South and Southeast Asia raised $204 million in its initial investment round and aims to amass another $200 million in the coming months. Managed by LeapFrog Investments, an emerging markets fund manager, the fund will invest in companies offering financial services such as general insurance, life insurance, savings, pensions, and investments products to low-income clients.
This is the second fund from LeapFrog. Its first, sized at $135 million, has a portfolio of seven investee companies whose financial products have reached over 18 million people across 13 countries. Many investors from the first fund have also contributed to this second venture. Investors of this initial investment round spanned major insurance groups, global banks, asset managers, and development finance institutions, including MetLife Inc., Prudential, Swiss Re, JPMorgan Chase & Co., CDC, and Oikocredit.
The demonstrated appeal of the new fund represents the enormous opportunity for the expansion of financial services in these emerging markets. “There are 1.9 billion emerging consumers in LeapFrog’s target regions, and their spending power is forecast to rise from $2 trillion today to $5 trillion in the coming decade,” LeapFrog’s President and Founder Dr. Andrew Kuper said of the fund.
> Posted by Center Staff
The U.N.’s Global Initiative for Inclusive Information and Communication Technologies (G3ict) is conducting a survey for financial services providers on the practices of their institutions in implementing services that are accessible for older persons and persons with disabilities (PWDs).
Older persons are the fastest growing age group globally. In 1950, 1 in 20 people worldwide was elderly. By 2050 it will be 1 in 5. PWDs are among the largest of vulnerable groups in the world. It’s estimated that about 15 percent of the global population has some sort of disability. To achieve full inclusion, it’s essential that financial services providers offer products and services that are accessible to these client segments.
The survey targets current practices of respondents’ organizations, as well as future services plans for these two client groups. Collected information will contribute to G3ict’s larger effort to design and share resources on service options for banks to effectively serve these underbanked groups.
> Posted by Alyssa Passarelli, Communications and Operations Assistant, the Smart Campaign
Technical assistance providers work every day with microfinance institutions to help them improve their operations. These interactions could be excellent opportunities to integrate the Client Protection Principles into operations. The Smart Campaign would like to connect with technical assistance providers who support client protection and work together with them.
In collaboration with The SEEP Network, the Smart Campaign is conducting a one day client protection training on November 4 specifically for specialists in technical assistance that work with MFIs and financial service providers. Technical assistance providers give consultative guidance to institutions to help them grow, become more efficient, and improve policies, practices, and performance. This is the Campaign’s first initiative to exclusively target this business area. Guiding these technical assistance providers on how to enhance their work as it relates to client protection will help them strengthen their impact and position this part of the industry to support positive practices.
> Posted by Alexa Roscoe, Private Sector Advisor, CARE International UK
The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
CARE International promotes microinsurance as part of the range of services and products that the poor need to help overcome poverty and reduce their vulnerability to shocks. However, we also know that as with all products, to be sustainable, any microinsurance model also needs to be profitable. Fortunately for the insurance industry and its clients, it’s being demonstrated that increasing profit and promoting financial inclusion do not have to be mutually exclusive. New research from our work in India shows that microinsurance distribution strategies that prioritize building clients’ financial literacy lead to almost three times as many new enrollments as those that do not.
There are a number of substantial challenges in marketing and distributing microinsurance products. Frequently, it is less a matter of marketing a product than building a new market from scratch, often in remote, hard-to-reach areas, with a client group without access to formal financial services. These factors make the costs of marketing to, distributing to and servicing clients disproportionate to the resulting margins. A number of strategies are being piloted globally to circumvent these challenges. For example, building off of growing mobile penetration rates among developing country populations, one initiative bundles an insurance product with the purchase of a SIM card. While this requires a lower initial investment, the jury is still out on the long-term value of such products. Unless clients receive thorough product education, such “blended approaches” might hinder awareness of the insurance product, as well as re-enrollment and the building of any brand loyalty.
> Posted by Kimberly Mitchell, Business Analyst, Credit Suisse
The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
This is the first in a series of several posts from this year’s Credit Suisse Virtual Volunteers, where research and insights across a variety of financial inclusion areas will be shared. The post begins:
Over the past few years, microfinance initiatives have empowered micro-entrepreneurs the world over to create and enhance their own businesses. However, not everyone has the ready-skills and resources to create their own successful business from scratch. For some entrepreneurs, it makes more sense to invest in a proven business model. In poor villages, this can take the form of a microfranchise.
In the developed world, everyone is familiar with franchises. The same goes for a big portion of developing regions. Businesses like McDonalds, Planet Fitness, and Pearl Vision provide a predictable and consistent-quality experience for consumers, a proven business model, marketing strategy, and often consistent source of supply for franchisees, and a scalable and profitable source of sales for the franchisor company. Microfranchise initiatives apply the principles of franchising on a smaller scale, with the aim of engaging a previously untapped market to provide a reliable source of income for the franchisees and more accessible products for consumers. The principle differences are that the amounts required for the business investment are smaller, and that the products are designed for the lower-income communities that the franchisees live in.
What potential does microfranchising hold to advance financial inclusion?
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